“Cheap buy”: Budde and Ludlam believe the NBN will be sold to Telstra

news Senior figures Paul Budde and Senator Scott Ludlam this week said they expected that the only company likely to buy a privatised National Broadband Network would be Telstra, as speculation continues to mount about a sale of Australia’s largest ever infrastructure project before it is even finished.

Last week Infrastructure Australia released what it billed as a 15-year Infrastructure Plan and associated priority list. The agency stated baldly that over the medium-term period, the Federal Government should “transfer NBN Co to private ownership”, including options for splitting the NBN company into chunks on either technological or geographical grounds. However, Infrastructure Australia did not include any rationale or evidence for why it had made the recommendation.

In comments made to the Senate earlier this week, Greens Senator and Communications Spokesperson Scott Ludlam said it was likely Telstra would buy the privatised NBN company.

“We have this proposal that we somehow privatise the network. Who is going to buy it? We all know who is going to buy it—Telstra is going to buy it,” said Ludlam, who is opposed to privatising the NBN company.

“So we will be back to the bad old days. They sold this obsolete copper network to the taxpayer and we are going to be handing this whole mess of garbage back to them to fix up.”

“We believe that there will be only one potential buyer for the mesh/mess NBN and that will be Telstra, one of the most successful and richest national telcos in the world,” the analyst wrote.

Budde said it was his opinion that Telstra would not pay the full value of the National Broadband Network, because of the complex Multi-Technology Mix approach to rolling out the NBN that Malcolm Turnbull imposed on the project as Communications Minister.

“They will never pay the full price for the NBN and because of the NBN mesh it is highly unlikely that any other company will pay such a price for the infrastructure. It is even questionable if they will be willing to pay the price of around the $27 billion price tag,” wrote Budde.

“So it will end up in a fire sale and because of its wealthy and powerful position Telstra will be the white knight. It might pay a bit above the fire sale price and incorporate whatever it can use into an FTTH network that it will then proceed to build for Australia.”

The news comes as others within the Canberra political sector have also highlighted the level of political influence which Telstra enjoys with Australia’s federal politicians.

Labor Senator Sam Dastyari — who has recently engaged in a crusade against major corporations in Australia over their tax avoidance habits — has publicly warned that there is something “fundamentally wrong and rotten” with Australia’s entire political system, stating that ten major corporations — including Telstra — had killed off proper democratic processes in the capital.

“The entire political debate has become so dominated by the interests that they’re pushing, and the agenda that they’re pushing,” Dastyari reportedly said. “And [we’ve] ended up with this complete crowding out of a proper political discourse in this country because there is one sectional interest that is so much louder than every other voice out there combined.”

opinion/analysis
Will Telstra end up owning at least part of the NBN company? Well, yes, of course it will. As I wrote last week when Infrastructure Australia made the recommendation to privatise the NBN company:

“Telstra is the obvious buyer of the NBN company’s FTTx assets. I don’t think much more needs to be said about that situation.”

Will this be a good thing? Of course not — it will be dreadful. The whole point of the NBN — aside from to help get Stephen Conroy and Kevin Rudd into Government — was to structurally separate Australia’s telecommunications industry and split Telstra up so that it couldn’t continue to strangle competition in the sector. Handing Telstra huge chunks of NBN infrastructure will reverse that process.

Personally I would oppose any privatisation or sale of any part of the NBN infrastructure, at least until we’re closer to 2030 and the network has been built out with universal fibre, and its economics have been well-established.

The Greens have been a bit quiet on the NBN issue lately (ceding much of the ground to Labor), but I think Ludlam nailed it in the Senate this week when he said:

“The wholesale network is a natural monopoly. It is like the freeway network, it is like the water distribution network, it is like the electricity network. You do not want two sets of power lines running down the street as a result of trying to set up some arbitrary form of competition at the wholesale layer. You do not want that in telecommunications networks either.

You want the wholesale NBN network in public hands, where the bosses can be brought into estimates committees and cannot hide behind commercial confidentiality, where budgets are tabled, where questions can be asked and answers can be provided, and you want that at the wholesale natural monopoly layer.

You want nbn co to stay in that box and to do one thing and do it well. Then you want to let competition rip at the retail layer. I think that the market structure that this parliament decided on after exhausting late-night debates, night after night, was effectively and essentially the right one.”

I expect a huge public outcry if the Government does attempt to split up and sell off the NBN company. Right now, Australians dont’ care about some kind of theoretical market structure when it comes to telecommunications competition. They just want better broadband: And by and large they see a Government-owned NBN company as the best vehicle to deliver that.

68 COMMENTS

Old school telco thinking, old school politics… We’re building FTTH, HFC, who would want that infrastructure? Telstra, they’ve got the ability to sell Foxtel down the lines, reliably.

Some of our mates in Parliament are thinking the same – lets look after our friends at Telstra and Foxtel, big business is the only way the infrastructure can be looked after!

Inside deals going on here, clearly.

——————————–

Seriously, i’ll agree with Ludlam on the issue here. We need to keep the NBNCo, and all its associated infrastructure as a government owned wholesale business. That is the only way to keep competition within the industry.

Allow NBNCo to only maintain ‘x’ amount of cash reserves for general use on things like maintenance and upgrades where required, any amount over ‘x’ must either be earmarked for a parliament approved project (more/bigger satellite links, for instance). That will allow the company to effectively operate at near to zero profit, allowing it to pass savings onto the RSPs, which will again increase competition between them and decrease the cost of use for everyday Australians.

What a bunch of short sighted, ill informed and rather poorly thought out ideas from groups who’s only agenda is to control infrastructure that they have no fundamental idea on how to maintain. You only need to look at the current mess we have in this country thanks to privatisation. No incentive to maintain the infrastructure or update it. It is all about how to make money. It took the government to front the money to do the NBN. I certainly would not want the private sector in charge of this infrastructure.
The best outcome for Australia is that all utilities are maintained by the government to ensure they are up to spec and have ongoing service and upgrades.
The private sector can then do the business of making money out of the selling of the services they provided.
In this way Australians end up with the best outcome for the private sector and the tax paying public.
As we see, big business does not like to invest in infrastructure and they are reluctant to pay tax.
I certainly hope that the NBN does not go the way of the remaining utilities in this country. It will be a very sad day indeed.
If governments could look 20years into the future, instead of worrying about the next election and filling the coffers for their cronies and sycophants we would be in a much better situation.
Again, I certainly hope common sense prevails, but who said there was any need to use common sense when it comes to politics and the best outcomes for our country.
God help us all.

We paid telstra ($11Bn) to decommission their network.
We let them keep it, and they continue paying maintenance on it while we overbuild it with fibre.
We then renegotiated the original deal to receive the CAN from them instead of decommissioning it.
We now have to foot the bill for the maintenance.
We upgrade it all for them at significant expense.
We sell it back to them at a fraction of the cost of the upgrade.

Telstra must not be able to believe their luck. At every iteration of this mess, they get more and more billions and take on less and less responsibility. The only way for punters to win out of the MTM is to become a Telstra shareholder. The Libs are the gift that just keeps giving for Telstra.

I missed crucial key statements, Telstra saying they are interested, and the ACCC allowing the largest communications company in Australia to get even larger and dominant the market even more than it is, other than that it’s go go go.

Stop trolling. Companies don’t announce intentions to make acquisitions until the ink is drying on the contract. Telstra will deny any involvement or knowledge of such discussions right up until they have submitted a bid, or they have actually bought the damned thing. The LNP are going to deny their intention to sell it off right up until they announce that it’s happening and there is nothing anyone can do to stop it. Have you seen their track record on transparency?

Australia has a huge problem here. Of Ozzies’ own making. Lack of political education IN SCHOOLS means Ozzies cannot avoid media and family influence over their choices.

On the Left we have Insurgent and Rampant Private Sector Interests.

On the Right, stands Socialist Incompetence.

To illustrate Socialist Incompetence, no Labor administration has ever even attempted to make PMG/Telecom Aust./Telstra toe the public service line, no attempt to split Telstra, and even less attempt to undo the privatisation of Telstra.

Telstra arguably has more influence over the average Ozzie battler’s life than Rupert Murdoch. Make that read “Murdoch + Fairfax”.

Not entirely accurate – Keating did start the split in 1995/96. The wholesale entity was known as “NDC” (Network Design and Construction), and most of the vehicles were actually re-stickered as such. Cue the 1996 election, and Howard and Alston halted it, and glued it all back together into one single Telstra. The separate entity never reached the sale point.

Almost all of the screw up in this entire industry has been LNP enforced…

What could Labor have done in 07? Nationalised a private company? Really? In Capitalist Australia, the land of free enterprise, where 99% of people genuinely don’t know there is anything but a capitalist model of economic governance?

With due acknowledgement of the errors made in the NBN’s design, what Labor created under Rudd and Conroy effectively was the answer to the capitalist monopoly behemoth called Telstra – the NBN would allow the domestic telco market an equal footing while destabilising Telstra. Sure, Telstra were still coming out laughing, but they needed to do two things – 1) get legislation through parliament and 2) avoid a protracted legal battle with Telstra. That $12bn was shut-up-and-go-away money. Turnbull turned it into little more than a cash injection, binding all kinds of clauses onto it costing the public billions more in new gifts to Telstra ($2bn estimated remediation, $1bn in annual maintenance contracts – over ten years that means that ‘not one cent extra’ agreement is worth *twice* the original $12bn agreement. No Malcolm, you’re right – there’s no point counting $12bn in cents, it will take too long.

@UG, If I am mistaken then ignore what I said, but wasn’t NZ in a similar situation as Australia was and they passed legislation to structurally separate their incumbent privately operated Telco into Chorus and a retail arm (which the name eludes me).

Sorry, that is not correct. NDC was just that, Telstra’s design and construction divisions spinoff into a separate company with the intention of selling them off. They were re-integrated when a buyer couldn’t be found after the dot com bubble burst.
Nothing whatsoever to do with wholesale.

Greens are a very long way from far left. Labor are mostly centrist, given their right leaning economic and immigration policies. Shorten is part of the right faction, which dictates a lot of their strategic direction. The left faction is also smaller.

The greens are fairly centre left. A ‘far left’ party would be advocating for nationalisation of mining companies, banking, public transportation and infrastructure, massive increases in social support programs, stimulus spending and an end to fixation on ‘budget surplus’. They’d want to unwind most if not all of our trade agreements as they are demonstrably bad deals for Australian people. They might even try to introduce laws with heavy penalties for public officials involved in theft of public assets into private hands (you know, that thing they call privatisation, where they tend to divest assets at far below the value they provide to the public or the replacement cost). Australia has no idea what a far left party would look like, because no one has any delusions about how it could possibly gain traction with a wholly uneducated and utterly brainwashed public.

Fair enough, I wasn’t really thinking in regards to comparisons to outside Australia, I was just describing them all in relation to each other rather than comparisons to other countries.

Example, the Democrats in the US are considered Left Wing, but some of them wouldn’t generally be considered Left Wing in Australia. The Republicans are further right than even some of the far right members in the LNP. Its why comparing other countries is… difficult.

Don’t be silly, that would make sense. If they had the “Australia first” attitude to do that, then they wouldn’t be selling it in the first place (and a whole lot of how we got here wouldn’t have happened either).

I’m living in a utopian world where an attempt at un-destroying the nbn is better than a destroyed nbn sold off to Telstra. Any world less utopian than that is equivalent to being stuck on a RIM with backhaul congestion between 3pm and 1am (or, as most people refer to it, “the noughties”). Welcome to yesteryear, I hope you enjoyed it the first time round, because the repeat will be slightly worse.

I wish NBNco was sold to Telstra, then my shares would be worth more! Hell maybe a higher dividend!
Telecoms in this country is flapped. Government in this country is flapped. I welcome our new Chinese overlords.
At least the Chinese know how to run state owned companies!

I think… No, I am positive. You’ll find that in a choice, the Chinese as a people and a government would instantly take FTTP as the base preference, it simply works better and cheaper. And that includes the caveats I learnt a lot about a couple of days ago. (Which are a subject for a separate debate.)

“I expect a huge public outcry if the Government does attempt to split up and sell off the NBN company” Seriously, do you? I expect huge outcry in the parts of the technical press and forums. But zero in the general public. If the Government sells it for 27bn then that is 27bn of tax cuts – must be good! Yes, I know it doesn’t work like that – but that is how it will be described.

” If the Government sells it for 27bn then that is 27bn of tax cuts – must be good!” Its actually $2.5B of extra tax required as the shortfall has to hit the budget if its sold for a loss because its no longer an investment and made a loss instead of a return (*sigh*).

If Telstra bought it for say 27 billion it would in reality be more like 16 billion because they wouldn’t need to pay themselves 11 billion for their own copper networks. They’d only need to give Optus their 800 million but even that I’m sure they could get the libs to pay as part of the deal.

Well not really, as NBN Co will have already paid Optus that $800m for their HFC assets, Telstra buying the NBN would just be a transaction between the Government of the day, and Telstra. Optus would have nothing to do with it.

That’s correct both payments to Telstra and Optus are phased payments, Telstra has got no where near their $11B yet, in the latest Half year results they only got a progressive payment of $636M from the NBN contract.

As to Telstra paying a bit more than the $27 billion, they have lots of experience dealing with government as a single buyer or a single seller and they have never hesitated to screw top (or bottom) dollar from every deal. It’s Kerry Packer and Channel 9 all over again with the taxpayer playing the role of Alan Bond.

The sale of NBNco to Telstra worries me enormously. The privatisation of our national telco for a measly amount (as it turns out), has turned into a massive bonanza for Telstra. We now pay more than most western countries for our comms and that for a less than stellar service outside the urban areas.

I’m reminded of Britain in the 70s. Britain decided that the North Sea oil profits should benefit the entire country rather than a few wealthy corporations. I was working for Burma Oil in London when it was nationalised for the then enormous sum of £550Million. Britain reaped the oil rewards of about £100Billion during the 80s (about double that in todays values), and the dividends continue to today…

What selling NBNco would be is the reverse of the above. We could be living in a country with reasonable comms prices and a tidy return to revenue, or we sell for a small sum and remain forever hostage to a predator corporation like Telstra. You really have to wonder who’s side our government is on, we already know who’s side Telstra is on.

To be honest unless its sold as a 100% take it all or leave it T$ won’t be touching the Cu parts with a barge pole. They grab the Fibre parts, the Sat and wireless (only if they really don’t want optus to have em) and just cherry pick and overbuild the other existing area’s with FttH. Basically we’ll be back to the bad ole days of ADSL1 just with a faster medium.

From several years ago on WP:
“The idea behind forcing NBNCo to install an obviously inferior network is that it allows Telstra to come in behind them and install a competing FTTH network in cherry picked high profit areas. Paid for with cash from selling dud copper to Turnbull.
This ensures that NBNCo can never become profitable. Thus it will “need” to be sold off cheaply in a fire sale.
Thankfully, there will be a cashed up telecommunications corporation waiting in the wings to take up the burden.
Guess who?
If you look at the Coalition policy in terms of providing better services, you are just looking at it the wrong way.”

As someone who is possibly leasing land to the NBN for a wireless tower, it seems that, according to the lease, NBN can transfer the infrastructure (tower) to another company if NBN is sold. NBN stops paying the lease, but NBN still hold the lease. If the new company decides not to pay lease that is up to them, can only complain to NBN if they still exist and no guarantee lease will continue to be payed.

There are current legislative limits on how much of NBN Co any one party can own, is it being suggested that these will be changed to allow Telstra to “own” NBN Co?

The truth of the matter is there is no money in packet switched networks any more, long ago is the time when you could charge for the use of them like old line switched networks. This is at the heart of the network neutrality debate, something we have mostly avoided in Aus to date.

Does anyone seriously think that Telstra are wanting to get back into the highly regulated (ACCC) wholesale market? Why would they want to do this? The real money is to be made on selling services and content over the top.

Telstra have had years to make this transition, they have spent much of the last decade hoarding the USO payments and consequently underinvesting in their network in preparation of the transition. NBN Co have provided the perfect set of circumstances for this, they have agreed to take on Telstra’s dilapidated network and to operate it or its replacement. But not only that, NBN Co are paying Telstra for every customer that is migrated away from their wholesale network and onto NBN Co’s.

NBN Co are effectively buying Telstra’s technological bad debt, under the original 93% FTTP policy this was a win/win for both sides. But Malcolm Turnbull has sold the nation out since, and it is now a win for Telstra only.

This has been the plan of the Telstra come NBN crew for a long time. They have sabotaged the roll out since they got their feet in the door so NBN gets a bad name and the whole thing ends up being gifted to them. In this area all the complaints and outages belong to them. I never hear a complaint from people using iinode.

If you expect a huge public outcry Renai, I suspect you’re severely over-estimating the general public’s interest in and knowledge of anything to do with this issue. It’s a crying shame, but that’s the reality.

Sell of the NBN as well as…
Institute of Liberal Party Policy.
1. Repeal the carbon tax, and don’t replace it. It will be one thing to remove the burden of the carbon tax from the Australian economy. But if it is just replaced by another costly scheme, most of the benefits will be undone.
2. Abolish the Department of Climate Change
3. Abolish the Clean Energy Fund
4. Repeal section 18C of the Racial Discrimination Act
5. Abandon Australia’s bid for a seat on the United Nations Security Council
6. Repeal the renewable energy target
7. Return income taxing powers to the states
8. Abolish the Commonwealth Grants Commission
9. Abolish the Australian Competition and Consumer Commission
10. Withdraw from the Kyoto Protocol
11. Introduce fee competition to Australian universities
12. Repeal the National Curriculum
13. Introduce competing private secondary school curriculums
14. Abolish the Australian Communications and Media Authority
15. Eliminate laws that require radio and television broadcasters to be “balanced”
16. Abolish television spectrum licensing and devolve spectrum management to the common law
17. End local content requirements for Australian television stations
18. Eliminate family tax benefits
19. Abandon the paid parental leave scheme
20. Means-test Medicare
21. End all corporate welfare and subsidies by closing the Department of Industry, Innovation, Science, Research and Tertiary Education
22. Introduce voluntary voting
23. End mandatory disclosures on political donations
24. End media blackout in final days of election campaigns
25. End public funding to political parties
26. Remove anti-dumping laws
27. Eliminate media ownership restrictions
28. Abolish the Foreign Investment Review Board
29. Eliminate the National Preventative Health Agency
30. Cease subsidising the car industry
31. Formalise a one-in, one-out approach to regulatory reduction
32. Rule out federal funding for the 2018 Commonwealth Games
33. Deregulate the parallel importation of books
34. End preferences for Industry Super Funds in workplace relations laws
35. Legislate a cap on government spending and tax as a percentage of GDP
36. Legislate a balanced budget amendment which strictly limits the size of budget deficits and the period the federal government can be in deficit
37. Force government agencies to put all of their spending online in a searchable database
38. Repeal plain packaging for cigarettes and rule it out for all other products, including alcohol and fast food
39. Reintroduce voluntary student unionism at universities
40. Introduce a voucher scheme for secondary schools
41. Repeal the alcopops tax
42. Introduce a special economic zone in the north of Australia including:
a) Lower personal income tax for residents
b) Significantly expanded 457 Visa programs for workers
c) Encourage the construction of dams
43. Repeal the mining tax
44. Devolve environmental approvals for major projects to the states
45. Introduce a single rate of income tax with a generous tax-free threshold
46. Cut company tax to an internationally competitive rate of 25%
47. Cease funding the Australia Network
48. Privatise Australia Post
49. Privatise Medibank
50. Break up the ABC and put out to tender each individual function
51. Privatise SBS
52. Reduce the size of the public service from current levels of more than 260,000 to at least the 2001 low of 212,784
53. Repeal the Fair Work Act
54. Allow individuals and employers to negotiate directly terms of employment that suit them
55. Encourage independent contracting by overturning new regulations designed to punish contractors
56. Abolish the Baby Bonus
57. Abolish the First Home Owners’ Grant
58. Allow the Northern Territory to become a state
59. Halve the size of the Coalition front bench from 32 to 16
60. Remove all remaining tariff and non-tariff barriers to international trade
61. Slash top public servant salaries to much lower international standards, like in the United States
62. End all public subsidies to sport and the arts
63. Privatise the Australian Institute of Sport
64. End all hidden protectionist measures, such as preferences for local manufacturers in government tendering
65. Abolish the Office for Film and Literature Classification
66. Rule out any government-supported or mandated internet censorship
67. Means test tertiary student loans
68. Allow people to opt out of superannuation in exchange for promising to forgo any government income support in retirement
69. Immediately halt construction of the National Broadband Network and privatise any sections that have already been built
70. End all government funded Nanny State advertising
71. Reject proposals for compulsory food and alcohol labelling
72. Privatise the CSIRO
73. Defund Harmony Day
74. Close the Office for Youth
75. Privatise the Snowy-Hydro Scheme

It’s time for a new Australian political party to leave the mess of the big 3 behind. We need a party that stands for true capitalism. None of this crony capitalism bullshit: Break up Telstra, The big 4 Banks, Coles, Woolworths, BHP/Gina, News Corp. Restore competition to the market. Give the ACCC the power to revoke corporate charters, Tax the top multi billion dollar companies at 90%+ and drop taxes on Small/Medium businesses. Give SMBs a real shot at growing and give capitalism a chance to flourish. Unemployment will drop, the economy will boom. It’s basically guaranteed by every economic study ever done. Monopoly power is bad for the economy.

The spectre of a nation under threat, whether from subversive communists, student radicals, Aboriginal activists, desperate asylum seekers or terrorists, has defined ASIO’s rationale since its inception in 1949

ASIO has acted at the behest of conservative governments for 42 of its 63 years. It is not only the mania for surveillance in the post–September 11 era that can be traced back to ASIO’s beginnings but also the entrenched suspicion of intellectuals, writers, artists and the ABC within the Coalition.

How far do you think your party would get attempting to split the right vote. I am not saying you are wrong but there needs to be a generational change and Australia (esp Canberra) currently has too many people who wake up on the wrong side of the bed.

Vital national infrastructure does not belong in private hands.
Privatization is the theft of public assets where the private sector reaps the rewards and losses are paid for by the public.
Telstra should never have been privatized. If it had not been, we would have our NBN by now.

Big problem with this, is that after spending taxpayer money to build it, any sale would have to involve the additional cost of writing down the construction cost to the sale price – so ~30% again of tax payer money.

It won’t be sold – will remain in Government hands until it could be sold for a profit – which will either be a very, very long time in the future, or never.

A sale and resulting write down would be political suicide for whichever party is in power.

Comments are closed.

Book now available

Written by Delimiter Publisher Renai LeMay, The Frustrated State is the first in-depth book examining of how Australia’s political sector is systematically mismanaging technological change and crushing hopes that our nation will ever take its rightful place globally as a digital powerhouse and home of innovation.

Welcome! We were an energetic and engaged community of Australians who worked with or who were interested in technology -- all sorts of IT professionals, IT managers, CIOs, tech policy-makers and tech enthusiasts.